---

Finance (No. 2) Bill

I will address the hon. Gentleman’s question about why that might be wrong, but the point, which was touched on in the last debate, is that both the Financial Secretary and the hon. Gentleman talk about the rate increasing from 20 to 30 per cent. Some people would argue that there is really a decrease, from 40 to 30 per cent. It depends on one’s starting point, in judging what the measure is trying to change. With amendments Nos. 10 and 11, I seek to retain the 40 per cent. tax relief rate, rather than to reduce it to 30 per cent. Before the changes took place in 2004, VCTs were running out of steam—their sales were low—and the temporary increase in tax relief to 40 per cent. stimulated that market. There is concern in the VCT market about the impact that the reduction in tax relief to 30 per cent. might have on the sales of VCT funds, and I shall quote some of the press comment around the time of the Budget. Bestinvest suggested that sales of VCTs in 2006–07 might be about £100 million to £150 million—quite a significant decrease on the amount achieved in 2005–06. Martin Churchill of Tax Efficient Review forecast sales of £250 million to £300 million. My hon. Friend the Member for Ludlow (Mr. Dunne) quoted the views of Henry Chaplin, suggesting that sales would be about £300 million. Clearly, we will not know the outcome until the end of the financial year, and there is uncertainty about the funds that VCTs will raise, and therefore the money that will be available to trusts to invest in small and growing businesses.